LET'S MAKE INVESTOR EDUCATION A REQUIREMENT

The material is intended primarily for high school students. But based on the questions I get from readers every day, adults could use it, too.

And that's the point: Teaching this information early can prevent costly mistakes later on.

I am talking about "The Basics of Saving and Investing: Investor Education 2020," a teaching guide developed by the not-for-profit Investor Protection Trust. The guide, endorsed by state securities regulators, is being provided at no cost to high school teachers and adult educators nationwide. (You can read or download one for free at www.investorprotection.org/basics.)

Materials on financial education are plentiful from a wide range of sources, from not-for-profit consumer and educational groups to banks, credit-card companies and other financial services firms. This one is different because of its clear focus on investing.

"Rather than reinventing the wheel, we have attempted to pare away the generic financial literacy materials that are widely available in order to zero in on our mission of investor education and protection," said Don Blandin, president and CEO of the Investor Protection Trust. The IPT was founded in 1993 as part of a multistate settlement to resolve charges of misconduct against investment firms by securities regulators.

So, while other materials typically address such topics as how to draw up a budget, balance a checkbook or handle credit cards wisely, the IPT guide focuses on "one thing and one thing only: investor education," covering such things as stocks, bonds, mutual funds, 401(k) retirement plans and IRAs.

It's about time we had such a guide, and I hope teachers use it as a framework for an entire course or as part of a semester or year of instruction, as it is intended. With traditional pension plans disappearing and the future of Social Security in doubt, all of us, and particularly young people, are more dependent than ever on our own investment knowledge.

"Today's high school students will soon be participating in the financial markets through individual investing or employer-based retirement programs or both," the guide says. "Too many people jeopardize their financial security by failing to take the time to learn about investing."

The guide's suggestion to teachers and the approach we all should take is to set financial goals that will inspire success.

"Students shouldn't be told just to 'save and invest' for their future," the guide says. Students will be much more interested and involved if the discussion is about tangible goals such as saving for a new car, a new house, a college degree or raising a family.

And we will be more likely to achieve our goals if we divide them into short-term (take a trip to Europe next summer), medium-term (buy a house in five years) or long-term (a comfortable retirement), and follow an investment strategy appropriate for each.

For short-term goals, we should consider low-risk investments such as certificates of deposit that mature about the time we'll need the money. For medium-term goals, mutual funds that invest in dividend-paying stocks can be appropriate.

For longer-range goals, we can consider a wide variety of possibilities, from stocks to government and corporate bonds to longer-term CDs.

All the while, we need to remember that risk and investing go hand in hand. We shouldn't take more risk than necessary, and proper diversification, or spreading our investment among multiple categories of assets, lowers our risk.

Just following this systematic approach to investing can boost our chances for success. Unfortunately, "the entry of most Americans to the securities market is by buying a product rather than understanding the process," Blandin said. My observation: Because of lack of investor education, too often we wind up buying (or being sold) an inappropriate product. Worse, we may fall victim to fraud.

Fighting investment fraud is a key part of the IPT's mission, and the teaching guide includes an entire unit on the subject, another distinctive feature that sets it apart from others.

"The best defense against investment fraud is a smart investor," the guide says. The unit on fraud encourages students to think critically by examining the seductive pitches used by con artists to fleece unwary and unsophisticated investors.

Pitches such as, "You can make 30, 50 or even 100 percent in just three to six months." Or, "The good news doesn't stop there. Not only can you get a way above-average rate of return, but there is no risk to your capital." In fact, as the guide says, with those types of pitches, "there is zero chance that you are being approached with a legitimate business opportunity. Why would anyone be doing you this favor?"